Why Solar Power’s Reliance On Utilities Is Growing

Posted on December 15th, 2011 by

Julia Hamm, President and CEO of the Solar Electric Power Association, discusses the current status of the solar industry and why the utility’s role in the growth of the solar industry is growing.

Full Transcript:

Ben lack: What is SEPA’s stance with regards to China’s involvement to generate additional solar capacity and trying to win that race of being energy independent.
Julia Hamm: Well, at SEPA we don’t get involved in any type of trade dispute. Our work is focused on helping utilities use and integrate more solar into their existing energy portfolio whatever way makes sense for them and their customers. Over the past few years, we’ve seen very significant positive trends in terms of the activities that utilities are taking the lead on with the use of solar. Everything from customer programs that facilitate more rooftop PV, to significant uptake in utility ownership of both distributed and some larger scale solar projects.All of that activity that we’ve seen, wouldn’t be possible without the significantly declining prices that we’ve seen, specifically over the past two years, but even within this past year of 2011. It’s important in terms of getting more solar capacity here in theUSand utilities play an integral role to that. It’s necessary for the price of solar to continue to get closer and closer to that of other options that utilities have. The price declines we’ve seen are significantly important trend that relate to utility activity in this space.
Ben Lack: Why are prices dropping?
Julia Hamm: It’s certainly a combination of factors, the additional competition in the marketplace largely from the Chinese but also from many European companies as well as the U.S. players. There is far more supply currently than there is demand and that factors into it heavily, but also policy plays a big role. It’s the way that the solar industry has always been, with markets that come and go and which are constantly in flux resulting from what’s happening from a policy standpoint on a country by country or, within the U.S., on a state by state basis. As we’ve seen some of the incentive levels decline in Europe, it is played into that supply versus demand scenario which has resulted the prices coming down quite dramatically.
Ben Lack: Is the reason why utilities are out in front on this is because they have the purchase power to help with the investment of these large solar projects?
Julia Hamm: There are many reasons why utilities are getting more and more engaged in solar. First and foremost, I would say that utilities are beginning to look at their business model and see that solar has an important role to play in the future of that. Utilities are proactively choosing to figure out how to give their customers what they want, but also satisfy their regulators and making sure that they’re providing cleaner energy options. Many utilities believe that at some point there is going to be price on carbon and they’ve recognized that solar becomes much more attractive in that scenario and so it’s important to get into the game now. There’s a whole variety of factors and certainly the fact that many utilities have a low cost of capital does factor into that equation as well, when you’re looking at the larger solar market picture. Utilities become very important partners for the solar industry because they do have low access to capital and in this tough scenario where project finances is not easy to come by, utilities become an increasingly attractive partner.
Ben Lack: Do utilities really care who the manufacturer is of the solar technology and is there any interest? I know that a few utilities are actually doing tests overseas with different projects. How much of an impact does that really have in the overall strategy of incorporating solar in your generation portfolio?
Julia Hamm: Utilities have always been technology agnostic and I think, to a large part, they’re quite agnostic as to where the technology is coming from. With the caveat being, there certainly is some level of interest, even more so I would say amongst the municipal utilities, but in some cases investor-owned utilities as well, regarding economic development within their own service territories. Utilities have an interest in taking advantage of the growing solar industry as an opportunity to provide economic development within their service territory. But, that doesn’t necessarily mean they have an opinion on where the product is coming from up the value chain. It could be that that economic development comes from the EPC work, it could relate to module assembly, it could be lots of different things but not necessarily related to pure manufacturing, in the sense that we’re talking about in this situation.
Ben Lack: From a policy perspective, what do you see is going to be happening over the next 6-12 months to advance the integration of solar into utility platforms? Is there any federal policy that you think is going to be able to take place or anything on a state or local level that might help incentivize certain parts of the country to continue adopting solar power?
Julia Hamm: I think it’s a very wide picture. It’s hard to predict whether federally we’ll see anything on the policy front that will help specifically with the utility piece of the business, but certainly on the state level there’s a lot going on. One thing which isn’t necessarily in all cases related to policy, although it can be in some circumstances, is that community solar programs are really a hot emerging utility trend right now. Utilities are developing larger scale PV projects and their individual utility customers are able to buy-in or lease a portion of that system, which then essentially is virtual net metered through the utility customers’ bill. So, it’s almost like a green pricing program on steroids. Whereas green pricing programs are a voluntary program where customers pay in for green energy, but don’t specifically know where that green energy is coming from. With these community solar programs, a customer is investing in a specific PV system, and knows that portion of the system is theirs and really can make a personal connection to that system.We’ve seen many community solar programs launch in 2011 by utilities across the country including places like Arizona, Colorado, Florida, Washington State and there are many other utilities that are in the process of developing community programs as well. So, I think that’s a really exciting new development. It’s a way for a whole new subset of customers to be able to have access to solar energy because these community solar programs are particularly useful to customers who either don’t own their own home or if their roof is shaded or if they just can’t afford to purchase an entire system for their home. These customers now have an option to be able to get a portion of their electricity from solar through this type of community solar program.
Ben Lack: I know that one of the obstacles that utilities are trying to think through currently is, how to incorporate the reliability risks of solar power into their overall generation mix. Where are utilities now with trying to find solutions for this and what steps can you take to better integrate solar power into the mix so that the grid stays consistent?
Julia Hamm: There are a lot of utilities that are very pro-active on that front right now, particularly state utilities in Hawaii and California because in many cases they are already experiencing some grid issues where they have very high penetration levels of solar within their service territory. And they’re doing some great work to pro-actively look at how to smartly integrate especially distributed PV into the grid. It’s a matter of not only figuring out how do we integrate PV into the grid to prevent it from doing harm but how do we actually integrate it in order to add value to the grid. There are many utilities across theUSthat are taking a very positive pro-active approach and looking at it not only again from the harm approach but also the adding value approach.There are a handful of utilities that are really taking a leadership role in those activities today, but utilities across the country are very focused on watching what’s happening in those states because utilities across the country recognize that solar is going to be an increasing part of their portfolio. So, even if today, say a utility in the Mid-West doesn’t have a high penetration of solar, they understand that with the dynamics that are coming in the future, there is a likelihood that they are before too long going to get to that point.
Ben Lack: Why have you chosen to do what you’re doing?
Julia Hamm: It’s a very exciting space to work in. I’ve been working with the organization for a long time, I first started in 1999 and it’s amazing in that dozen years or so, we’re constantly moving the ball forward and I feel as though we aren’t even close yet to the point of plateauing. It’s just a constant upward stream. It’s very exciting for me. From an industry perspective to work in a space where I see so much potential but then also in an organization level for SEPA. Every day, I see more and more we can be doing that’s going to be helping utilities smartly integrate solar into the grid. It’s just an exciting place to be both in from an industry perspective and organization perspective.

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